Vermont Regulator and Credit Union Reach Agreement on Use of ‘B-Word’

Vermont State Employees Credit Union (VSECU) and the Vermont Department of Financial Regulation (DFR) announced last Friday that an agreement has been reached regarding the use of “bank/banker/banking” by VSECU and other state-chartered credit unions.

Vermont state statutes prohibit credit unions from using such words unless the commissioner of DFR finds the use would not be misleading or confuse consumers as to the nature of the institution.

Under the new agreement, the credit union will not describe itself as a bank but may use the word “banking” and similar words when advertising its services as long as it discloses that it is a credit union. The disclosure that VSECU is a credit union must be “clear and conspicuous so that reasonable consumers can read, see or hear and understand the information.”
DFR, which is charged with enforcing the statute, had issued a notice of intent to order the VSECU to stop using the word bank. The issue then drew national attention after the credit union responded to the DFR notice by requesting an administrative hearing. In settling, both parties agreed to withdraw any and all claims and actions, terminating the hearing process that had been underway.

“This request for a hearing teed up a matter that’s been in discussion for a number of years;” Kimbell said, “it gave us a context in which to reach agreement on how to apply the statute.”

According to Credit Union National Association (CUNA) General Counsel Eric Richard, “this settlement should allow Vermont credit unions plenty of flexibility to market their services to people who might otherwise be thinking of patronizing a bank. And it is always good to avoid the costs of litigation.” 

The settlement also stipulated that VSECU “will not describe itself as a ‘banking cooperative,’ ‘banking co-op,’ ‘bank,’ ‘banking association,’ ‘trust company,’ or other similar sounding word or name in its advertising or marketing,'” and would discontinue using these phrases in its materials beginning Nov. 15. DFR would not take regulatory action on VSECU’s use of such wording in referring to itself.

The agreement specified that “VSECU is not prohibited from using the word ‘bank’ or any derivative of the word ‘bank’ to describe its services or to differentiate itself from a bank, e.g. by describing itself as a ‘banking alternative’ or as an entity that is ‘redefining banking,'” according to the agreement document. It also clarified that VSECU can use “bank” or “banking” or derivative terms or phrases in the text of hyperlinks or search engine designated links, and that in these situations it would not be required to include the term “credit union” in the link text as long as it is disclosed on the landing page.

“I want to thank the VSECU for its help in finding a way to reasonably apply a decades-old statute in a rapidly changing environment for financial services,” DFR Commissioner Stephen Kimbell said.

“This is not a matter of who won or lost a dispute,” said VSECU CEO Stephen Post, “but an example of the state’s regulators and industry working together to solve a problem.”

Questions? Contact Director of Regulatory Advocacy John Trull: 503.350.2209, jtrull@nwcua.org.

Posted in Around the NW.